Court Cases Help Guide Assessment
Review Process [Sidebar]
Exploring Options for Assessment Review
(from Maine Townsman, February 2008)
By Lee Burnett, Freelance Writer
For many Maine communities, property tax abatement appeals go to the county commissioners after being considered by the local assessor(s). Some municipalities have local boards of assessment review (BARs) that handle the appeals of abatement requests.
Having county commissioners as an appeals board can be “a crap shoot,” according to Sally Daggett, a Portland lawyer who specializes in municipal law with the firm Jensen Baird. It’s not that commissioners are ill-intentioned people, says Daggett. It’s that they typically receive no training in property assessing, handle few appeals, and rely for legal advice on the local district attorney, whose forte is criminal law. “We haven’t found too many county commissioners that have a clue about assessment law,” said Daggett.
And having a clue is not nearly enough for the Maine Supreme Court. The court has insisted on a level of legalism in decision-making that goes beyond a lay person’s common sense. Decisions must be grounded in the facts and reasoned according to the correct legal standards. And no excuses are accepted for sincere but flawed efforts by lay people doing the best they can. The court has consistently held high expectations for all manner of administrative decisions, whether they are tax abatement requests or planning board matters, explains William Dale, an attorney and colleague of Daggett’s.
“The court has become increasingly insistent in the last 10 years that these administrative decisions be done right,” said Dale.
Some recent news from the field:
• In a court remand last September, Waldo County Commissioners were ordered to revisit their decision to split the difference in a tax abatement case from Brooks. Commissioners had awarded a 12 percent abatement in response to the local assessor’s outright denial of a 25 percent abatement request. The judge instructed the commissioners that the burden of proof in assessment law rests with the taxpayer to show the assessor is “manifestly wrong,” not with the commissioners to find a happy middle ground.
• The Biddeford Board of Assessment Review was repeatedly rebuked by courts for its opaque process in denying abatement requests filed two years in a row by Ronald Peaker. In the first year’s case, the board twice failed to sufficiently document its decision-making process, even after a judge had remanded the case. In the second year’s case, the board failed to even hold a hearing and through both cases the board never addressed the argument raised by Peaker. None of those messages got through to the city until the Maine Supreme Court last August upheld the lower court’s remand of the decision back for an abatement.
• In a court remand last October, the Oxford County Board of Assessment Review was ordered to revisit and apply the proper legal standard in a joint tax abatement request from Stoneham that the board had earlier denied. The judge said the board does not need to believe there was malicious intent to find unjust discrimination in how a property is valued. Ironically, the review board was created because county commissioners felt overwhelmed by the complexity of tax abatement appeals. Commissioners themselves had upheld an earlier appeal from some of the same Harding Hill residents in Stoneham, and saw their decision appealed to court by the Town of Stoneham. That case is still pending.
The most common mistake made by lay boards is failing to document and make transparent their decision-making, say attorneys interviewed for this article. “That’s what we see more than anything else,” explained lawyer Brad Pattershall, who represents Harding Hill neighbors. “You gotta explain what you’re doing and why you’re doing it, so if it’s appealed a judge can look at it and say, ‘oh yeah, you didn’t apply the right legal standard.’ ... there is a learning curve.” Concurs Daggett, whose firm represents Stoneham: “The court has said [in effect], ‘we know you’re all volunteers. Tough. You’ve got to make findings of fact and conclusions of law. You can’t make conclusory statements, you have to show what evidence existed and how you arrived at your decision,’”
Needless to say, having to undo or redo decisions per a judge’s order can run up a town’s legal bills. “It can be a lot of money to go to court and then have it sent back to the town,” said Daggett.
State law allows a more localized alternative to the county commissioners as an assessment review board for municipalities – the local board of assessment review (BAR). Nobody know exactly how many communities have BARs , but based on the attendance at two workshops conducted by the Maine Association of Assessing Officers (MAAO) last year, the idea of training people who are doing abatement appeals seems to be a popular idea. The two workshops drew a combined audience of about 210 people. “A pretty good turnout for a pretty dry subject,” noted Daggett, who along with Dale and MMA’s Geoff Herman spoke at the workshops.
The local board can be a less risky alternative to the county commissioners as an assessment review board, particularly if the members have backgrounds in assessing, real estate appraisals, or real estate sales, say the Jensen Baird attorneys. The only significant cost in setting up a local assessment review board is training. But as Dale points out: “An evening of training might cost $500 to $750 while going to court and having it remanded back might cost $5,000.”
Cost savings is not the primary purpose of having a local board; instead it is the quality of decision making, say Dale and Daggett. “It’s not so much the outcome but more the attention to a fair process and procedures,” says Daggett.
Kennebunk saw the value of its municipal board of assessment review following a 2003 revaluation of property, the first in perhaps two decades. A total of 81 taxpayers sought abatements on properties valued in the tens of millions of dollars. The local board of assessment review granted two abatements worth about $470 in taxes, according to Assessor Daniel Robinson. Of the denials, three were appealed to court, one all the way to the Maine Supreme Court, a case that led to a minor law change. The experience demonstrated to Robinson that it is “absolutely” a good idea to appoint a local BAR, particularly in advance of a revaluation. “No doubt about it. It behooves all towns, big or small to have their own trained board.” The point of a local board is not to reduce the number of appeals, says Robinson, but to make the decision so rock solid that it can stand up to any kind of appeal.
“I don’t think a local board discourages appeals, but at least with a local board we can have some control about their training,” says Robinson. “We can be sure they understand the undertaking and what the law is. I don’t know what kind of training the county commissioners get. It’s kind of hard to say, they come and go.”
Harpswell, which has gone through revaluations in 1998 and 2005, has never considered a local board of assessment review and doesn’t plan to any time soon, according to Selectman Chairman Samuel Alexander. Following the last revaluation, the Board of Assessors (also the selectmen) granted 166 abatement requests and denied 84. Of the 13 denials that were appealed, Cumberland County Commissioners upheld all but one, in which they awarded a partial abatement, according to town records. Commissioners also backed the town in its repeated denials of joint abatement requests from a group of a dozen property owners in the same neighborhood. Overall, Alexander said he has confidence in the county commissioners. “I think they’re knowledgeable,” he added.
Even though Alexander attended one of the BAR workshops, he sees no need to appoint one in Harpswell. “I, personally, don’t see any need to make any changes yet,” said Alexander. “I think we’re in good shape.”
Up in Oxford County, where real estate values are said to be very fluky, the newly created Oxford County Board of Assessment Review is off to a rough start. It was created during the protracted Harding Hill subdivision abatement case. The board split 4-1 in its first decision, which was promptly appealed to court and remanded back with instructions. County commissioners, who set up the board, said that valuing property is particularly tricky in Oxford County because some remote areas are as sleepy as anywhere in Maine while others are experiencing booming property sales.
“The volatility of the real estate market is unbelievable,” said County Commissioner Steve Merrill. “You see these out-of-state people come in and there’s no limit to what they’ll pay. They’re driving up the comp values of these 200-year-old homesteads and farmsteads, driving them right out of business. It’s a real convoluted mess,” he says.
The Oxford County board is the first established in the wake of a change in state law that allows the appointment of a county board of assessment review. “We did the best we could and still handled ... all [appeals] up until last year,” said Merrill. “It gets pretty complicated, especially with commercial property.”
The five-member assessment review board is comprised of people with backgrounds in real estate sales, real estate appraisals, tax assessing and local and state politics. That its first case was remanded back for clarification underscores Merrill’s point. “It bolsters my case. We’ve had selectmen (assessors) and commissioners - elected people - decide these issues (in the past) and in one of the first cases of any complexity, it (the board) is split. It’s almost to the point that lay people should be relieved of these responsibilities.”
Stoneham, a town of 250 residents, has already expended $15,000 in legal expenses, which is six times more than it usually spends all year and there’s no end in sight. “I’ve got to tell you, this is a waste of money, but we can’t afford to lose,” said Selectmen John Collins. Last July, Stoneham residents voted to authorize a revaluation of all property in town.
There’s a broad range of acceptable assessment methods, according to Dave Ledew, head of the property tax division of Maine Revenue Services (MRS). And some communities intentionally keep their assessing methods simple, he said. “It can make it difficult for a taxpayer to challenge ... because the methodology isn’t clear.” Communities that use more sophisticated methods may even invite more challenges. “Just because you have a professional [assessor] involved doesn’t mean everyone agrees,” said Ledew. “You can have 10 fee appraisals and 10 different values. Hopefully, they’re all in the neighborhood.”
Valuation systems are becoming more standardized but, as Ledew points out, Maine has 490 municipalities and many still do assessing the old fashioned way – listing all properties in a single document that also serves as the tax commitment. “There are still towns that do not have property record cards and tax maps,” said Ledew. “To use an example, when Harpswell revalued property seven or eight years ago, they did their first property record cards and they were a half-billion-dollar town.”
A reason to consider not appointing a board is that it is rarely needed. Some boards can go years between meetings, according to William Healey, assessor for Yarmouth and Cumberland. Still, Healey favors local boards. He says he has no trouble filling vacancies with highly qualified people and he’s never had an appeal go to court. Very small towns that already have trouble finding people to serve in town government might not want to appoint another board that goes begging for members.
The complaint voiced about local BARs is that as creatures of local government they tend to support the local assessors. “All of the feedback I’ve received from taxpayers going to local board of assessment review is basically they’re inclined to support the assessor,” said Ledew. Ledew said he has no opinion on whether he believes the complaints are valid. Attorney Dale discounts the ‘cronyism’ criticism. “There might be some who would be inclined to the local assessor, but the reality is that people who volunteer tend to be people who don’t have blind allegiance to the local assessor,” he said.
Court Cases Help Guide Assessment Review Process (sidebar)
Maine law does not expect perfection in property assessments. Quite the contrary: the courts have recognized that valuing property for tax purposes is an exercise in approximation. The court’s standard is that tax assessments “shall be apportioned equally, according to the just value thereof,” which has come to mean market value. But that’s fairy-tale land. The only way individual property assessments could possibly mirror their individual market values is for all property in town to change hands every year that taxes are assessed: Willing seller to willing buyer. That way, assessed values would exactly match market values. But in real life, some property changes hands often, some hardly every. The assessor’s job is to use whatever sales data is available each year as a benchmark, from which to extrapolate the value of the remaining properties in town. The more property sales available and the more variety of kinds of property sold the easier the task. There’s considerable judgment involved and courts have given assessors deference in exercising that judgment.
The Maine law starts with the presumption that the assessor is right, whether the assessor is a paid professional or a part-time selectman who attended an assessors training seminar. The burden of proof rests with the taxpayer to convincingly demonstrate the assessment is “manifestly wrong.” It is not enough to show certain factors were not considered. The taxpayer must show the property is substantially overvalued or that the assessment was discriminatory or fraudulent, dishonest or illegal.
In a series of selected cases, the high court has provided additional guidance.
Equity trumps just value
Acknowledging the difficulty in pegging a property’s just value, the Maine Supreme Court held in Kittery Electric Light Co. v. Assessors of the Town of Kittery 1966 that, at the very least, assessments should aim for equity. In this case, the town had assessed the utility’s property according to the average discount among non-residential properties in town. The light company sought a deeper abatement, according to an outside expert’s opinion about the prevailing discounted average. The lower court disagreed with both and ruled that the utility was entitled to the same discounted average as all residential properties in town. “It makes no difference what basis of valuation is used, that is, what percentage of full value may be adopted, provided that it be applied to all alike,” according to the decision.
Portions can’t be abated
“I’m okay with my building value, but the land value is too high,” is one of the most common abatement arguments. It’s an argument that holds no water with the court in Roberts v. Town of Southwest Harbor 2004. In this case, the property assessment was broken down into five components, one of which the taxpayer claimed was too high and on which he based his abatement request. The Supreme Court held that the taxpayer was not harmed unless he could prove the overall assessment amounted to unjust discrimination.
Judgement is permissable
There are many ways to arrive at property assessments and as long as the assessor acts professionally and considers alternatives he or she is not bound to choose one over another, according to Shawmut Inn v. Town of Kennebunkport 1981. At issue was whether assessors took into consideration some mitigating factors in the value of a seaside resort that had seen better days. “It is not for us to mandate the sue of any single appraisal method,” according to the decision. But assessors are bound to utilize “scientific appraisal techniques” and they should use other appraisal methods as “checks in testing the reasonableness of such values...,” according to the decision.
Findings of fact, please
Just because a board is comprised of lay people doesn’t exempt it from following a professional process in arriving at decisions. Merely reiterating the evidence presented, for example, does not constitute properly detailed “findings of fact,” according to Christian Fellowship and Renewal Center v. Limington 2001 The case concerned whether a charitable organization could be taxed for rental property used for non-charitable functions. But the decision by York County Commissioners did not set the facts straight. “.. we are unable to determine or infer the subsidiary facts from the general conclusion, and we are left without knowing whether the commissioners found that the Center occupied or used its property for non-charitable purposes; whether the commissioners relied on the letter from the Maine Bureau of Property Tax Exemption [it appears that the justices were meaning the Division of Property Taxation within the Bureau of Taxation – now Maine Revenue Services] for their conclusion; or whether some other basis underlies their conclusions.”